OGV Energy's Middle East Energy Review

The highly-anticipated OPEC+ monthly ministerial meeting, numerous contracts, new oil and gas discoveries, and a pledge for emissions reduction from a major petroleum company were the biggest themes in Middle East oil and gas at the end of 2020 and the start of 2021.

OPEC+ moves to tighten oil market

The ministerial meeting of the OPEC+ group decided on 5 January not to raise collective oil output by another 500,000 barrels per day (bpd) from February, as the leader of the non-OPEC group in the pact, Russia, was proposing.

Before the start of the meeting, OPEC Secretary General Mohammad Barkindo said: “Amid the hopeful signs, the outlook for the first half of 2021 is very mixed and there are still many downside risks to juggle. We are only beginning to emerge from a year of deep investment cuts, huge job losses and the worst crude oil demand destruction on record.”

Russia had insisted on another easing of the total oil production cuts, despite the soaring COVID-19 cases in Europe and the United States which had prompted major economies in Europe to reinstate lockdowns to fight the pandemic. Most other members of the OPEC+ coalition, however, were not in favour of boosting production amid expected weaker global oil demand in the first quarter of 2021. Saudi Arabia, OPEC’s top producer and de facto leader, was also in the ‘no-increase’ camp.

In the end, after two days of discussions, the OPEC+ ministers decided to basically roll over the current cuts of 7.2 million into February after Russia agreed to back off its proposal that the group ease the cuts by 500,000 bpd in February. Russia, however, obtained a compromise win that let it lift its crude oil production by 65,000 bpd in February and by another 65,000 bpd in March. The only other OPEC+ member that is allowed to raise output is Kazakhstan, whose production will rise by 10,000 bpd in February and then by another 10,000 bpd in March. The quotas of all other members of the OPEC+ pact remain unchanged for February and March, according to the detailed cuts distribution document OPEC released at the end of the meeting.

Saudi Arabia unilaterally moves to support market

At the end of the OPEC+ meeting, OPEC’s leader and the largest oil exporter in the world, Saudi Arabia, surprised analysts and the oil market by announcing it would cut its oil production by 1 million bpd beyond its quota under the deal, to support the oil market.

Indeed, the Saudis supported oil prices which rallied after the announcement and within a week reached their highest level since February 2020.

Saudi Arabia is also reportedly reducing its term contract oil supplies to refiners in Asia for February, officials at refineries have told Bloomberg.

Middle East deals & discoveries

Saudi Arabia’s oil giant Aramco has discovered four new oil and gas fields in the Kingdom, Energy Minister Prince Abdulaziz bin Salman, said at the end of December.

Non-conventional oil has been discovered in al-Reesh oil field, northwest of Dhahran, while non-conventional gas has been discovered at al-Minahhaz well, southwest of the giant Ghawar oil field, and at al-Sahbaa well, south of Ghawar. Aramco also struck oil at al-Ajramiyah Well No. 1, northwest of the city of Rafhaa in the Northern Borders Province.

The discovery at al-Reesh field is especially important as it shows that it is possible to produce Arab extra light crude oil at the Tuwaiq Mountain Formation, the Saudi energy minister said, as quoted by the Saudi Press Agency.

Saudi Aramco has also signed several deals with technology giants over the past month.

Saudi Aramco Development Company, a subsidiary of Aramco, said on 21 December it had teamed up with Google Cloud to offer high-performance, low-latency cloud services to enterprise customers in Saudi Arabia.

“The future of Saudi Arabia’s business transformation and growth depends on its ability to successfully leverage cloud services,” Aramco Senior Vice President of Technical Services, Ahmad Al Sa’adi, said in a statement.

The Saudi state oil giant also signed a strategic alliance with SAP to expand the digitalisation of its Enterprise Resource Planning (ERP) systems.

“The SAP ERP system will deepen the deployment of innovative IR4.0 technologies including cloud-based services, embedded analytics, mobility, machine learning, artificial intelligence, advanced analytics and Internet-of-Things solutions,” Aramco said.

Finally, Aramco also set up a joint venture with industrial software company Cognite, creating a new company which will focus on digitalisation in Saudi Arabia and the broader Middle East and North Africa region. The joint venture will develop, distribute, and deploy end-to-end digital and advanced solutions for customers across industries, including oil and gas, power and utilities, manufacturing, and shipping.

In the United Arab Emirates (UAE), the Abu Dhabi National Oil Company (ADNOC) signed in December a strategic framework agreement with ExxonMobil to explore joint technology research and development (R&D) partnership opportunities across the oil and gas upstream value chain. ADNOC and ExxonMobil will identify areas of mutual interest for conducting R&D and co-developing technology solutions that will help increase upstream operational efficiencies, strengthen health, safety and environment (HSE) management, and unlock business value. Initial areas identified include advanced non-metallic solutions, field testing and integrity management, smart reservoir management and well monitoring systems, and innovative emergency response systems.

ADNOC also awarded the exploration rights for Abu Dhabi’s Offshore Block 3 to a consortium led by a unit of Italy’s Eni and PTTEP MENA Ltd., a wholly-owned subsidiary of Thailand’s PTT Exploration and Production Public Company Limited (PTTEP).

“Despite volatile market conditions, we are making very good progress in delivering Abu Dhabi’s second competitive block bid round, underscoring our world-class resource potential and the UAE’s stable and reliable investment environment. We continue to welcome partners that share our vision to sustainably unlock value from our hydrocarbon resources for our mutual benefit, as we deliver on our 2030 strategy and enable long-term returns to the UAE,” said Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology and ADNOC Group CEO.

In another project of Eni in the UAE, the Italian company announced in early January production start-up from Mahani Field in the Sharjah Emirate. Eni and Sharjah National Oil Corporation (SNOC) began production from the Mahani field, located in onshore Concession Area B of the Sharjah Emirate.

“Production start-up has been achieved in less than two years since Contract Signature and one year since the discovery announcement thanks to the fruitful and continuous cooperation with SNOC,” Eni’s chief executive Claudio Descalzi said.

In Qatar, the top exporter of liquefied natural gas (LNG) in the world, Qatargas awarded in January a contract to McDermott International to deliver front-end engineering and design (FEED) work for Qatar Petroleum’s North Field South (NFS) project.

“For more than 30 years, McDermott has executed projects in Qatar's North Field, and we will leverage our experience and local resources to successfully deliver this project,” said Tareq Kawash, McDermott Senior Vice President, Europe, Middle East and Africa.

Qatar Petroleum launched on 13 January its new Sustainability Strategy, establishing a number of targets aligned with the goals of the Paris Agreement. Qatar Petroleum is launching a plan to reduce greenhouse gas emissions by 2030. The company will aim to reduce the emissions intensity of Qatar’s LNG facilities by 25 percent and of its upstream facilities by at least 15 percent, and reducing flare intensity across upstream facilities by more than 75 percent. The strategy also includes Carbon Capture and Storage (CCS) facilities to capture more than 7 million tonnes per annum of CO2 in Qatar.

“Qatar is the world’s largest LNG producer and, by implementing our Sustainability Strategy, we will play a decisive role in helping reduce the impact of climate change by implementing measures to curb emissions, produce LNG using the latest proven carbon reduction technologies, and compensating for residual emissions where necessary,” said the Minister of State for Energy Affairs and the President and CEO of Qatar Petroleum, Saad Sherida Al-Kaabi.

In Bahrain, Italy’s Eni, via its environmental firm Eni Rewind, signed an agreement with the National Oil and Gas Authority (NOGA) to develop circular economy initiatives for the recovery of soil, water, and waste resources in Bahrain, where the Italian major has been present since 2019 as the sole owner and operator of the offshore exploration Block 1.

Read the latest issue of the OGV Energy magazine HERE.